New Paccar plant heralds North American vertical integration

Last night Paccar announced it will build a $400 million facility to manufacture and assemble 12.9- and 9.2-liter engines for its Peterbilt, Kenworth and DAF-branded Class 8 trucks for the OEM’s North American and global markets

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Last night Paccar announced it will build a $400 million facility to manufacture and assemble 12.9- and 9.2-liter engines for its Peterbilt, Kenworth and DAF-branded Class 8 trucks for the OEM’s North American and global markets. The plant, which is due to be completed in the Southeast United States in 2009, confirms the long-rumored Paccar initiative to vertically integrate its engines in the North American market.

“The Paccar 12.9-liter and Paccar 9.2-liter engines are of a similar displacement as to what’s being offered in DAF trucks worldwide,” Andy Wold, Paccar treasurer told FleetOwner.

“The…facility strengthen’s Paccar’s global manufacturing and assembly capacity and positions Paccar to capitalize on growing opportunities in North America, Europe and Asia,” said Mark Pigott, the company’s chairman & CEO. He added that it the facility will provide the flexibility to supply products and components to Paccar facilities and customers on a global basis.

“Paccar has learned from DAF and its customers the performance and cost advantages of installing its own powertrain, as well as the benefits of additional aftermarket parts and service business for our dealers,” added Jim Cardillo, executive vp for the Bellevue, WA-based truck maker. “Offering a Paccar powertrain to our North American customers will provide additional choices in their vehicle specifications.”

The plant will be a full manufacturing facility and include a technology center.

According to Bear Stearns, the Paccar announcement provides yet more evidence of a trend to build greater vertical integration among truck OEMs and would likely erode the market share of engine maker Cummins. The engines built at the Paccar facility will not compete directly with Cummin’s 11- and 15-liter engines, but dealers may try to shift customers to Paccar-branded engines to gain more aftermarket parts business, Bear Stearns said.

On the medium-duty side, Cummins is under a long-term agreement with Paccar to provide Paccar-branded 6.7-liter and 8.3-liter engines exclusively for the use in Kenworth and Peterbilt trucks. That deal was one reason why Cummins recently predicted that its market share would grow.